SurModics Inc. Reports Operating Results (10-Q)
Surmodics Inc. has a market cap of $234.1 million; its shares were traded at around $13.44 with a P/E ratio of 28 and P/S ratio of 1.9. Surmodics Inc. had an annual average earning growth of 23.5% over the past 10 years. GuruFocus rated Surmodics Inc. the business predictability rank of 3-star.SRDX is in the portfolios of Bill Frels of Mairs & Power Inc. , Chuck Royce of Royce& Associates, PRIMECAP Management, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Asset impairment charges. In the third quarter ended June 30, 2010, we recorded net asset impairment charges of $0.2 million. We recognized an impairment charge of $0.4 million associated with prototypes and other equipment related to a development project for which no ongoing business is expected in the near term in light of current market conditions. We also reversed $0.2 million of previously recorded asset impairment charges associated with a facility in Alabama. The facility was presented as an asset held for sale and was recorded at fair value less estimated selling costs during the second quarter of fiscal 2010, resulting in an asset impairment charge of $2.1 million. During the current quarter we re-classified the facility to held and used property following further analysis of various factors associated with the consolidation of facilities, which resulted in the property being recorded at its current fair value, which was $0.2 million higher than the fair value less estimated selling costs at the time we determined it to be available for sale in the second quarter of fiscal 2010 and recorded the initial asset impairment charge.
Other (loss) income. Other (loss) income was a loss of $2.0 million in the third quarter of fiscal 2010, compared with income of $0.8 million in the third quarter of fiscal 2009. The decrease primarily reflects an impairment loss on investments of $2.6 million in two of our strategic investments. Partially offsetting the fiscal 2010 impairment loss was income from investments of $0.2 million, compared with $0.4 million in the third quarter of fiscal 2009. There were realized gains from our investment portfolio of $0.3 million and $0.4 million in fiscal 2010 and 2009, respectively.
Therapeutic. Revenue in Therapeutic was $46.0 million in the first nine months of fiscal 2010, a decrease of 49% compared with $90.5 million in the first nine months of fiscal 2009. The decrease in total revenue reflects the recognition of revenue of approximately $45 million associated with the terminated Merck collaborative research and license agreement, which was terminated effective in the first quarter of fiscal 2009. Excluding this significant event-specific item in fiscal 2009, revenue increased $0.5 million in the first nine months of fiscal 2010 compared with the comparable prior period. Therapeutic revenue is further characterized by the market-focused areas detailed above.
Other (loss) income. Other (loss) income was a loss of $1.5 million in the first nine months of fiscal 2010, compared with income of $1.8 million in the first nine months of fiscal 2009. The decrease primarily reflects impairment loss on investments of $2.6 million in fiscal 2010 in two of our strategic investments. Partially offsetting the fiscal 2010 impairment loss was income from investments of $0.8 million, compared with investment income of $1.5 million in the prior-year period. The decrease in investment income primarily reflects lower investment balances. We also recognized gains from our investment portfolio of $0.3 million and $0.8 million in fiscal 2010 and 2009, respectively. Our fiscal 2009 realized gains were partially offset by our pro rata net loss on equity method investments.
As of June 30, 2010, the Company had working capital of $32.9 million, of which $21.7 million consisted of cash, cash equivalents and short-term investments. Working capital increased $3.9 million from September 30, 2009, principally reflecting higher short-term investments and prepaid and other current assets offset by lower accounts receivable balances. Our cash, cash equivalents and short-term and long-term investments totaled $54.8 million at June 30, 2010, an increase of $6.9 million from $47.9 million at September 30, 2009. The Companys investments principally consist of U.S. government and government agency obligations and investment grade, interest-bearing corporate debt securities with varying maturity dates, the majority of which are five years or less. The Companys policy requires that no more than 5% of investments be held in any one credit issue, excluding U.S.
In November 2007, our Board of Directors authorized the repurchase of $35.0 million of the Companys common stock in open-market transactions, private transactions, tender offers, or other transactions. The repurchase authorization does not have a fixed expiration date. During the nine months ended June 30, 2010, the Company repurchased 102,533 shares for $2.0 million at an average price of $19.81 per share, leaving $5.3 million remaining available for future share repurchases under the repurchase program.
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